The Palestinian parliament Tuesday approved a bill defining the powers of the new post of prime minister.

At a special session in the West Bank city of Ramallah, the Palestinian Legislative Council passed a bill setting out the authority of a future prime minister.

The decision came one day after the parliament rebuffed efforts by the president of the Palestinian Authority, Yasser Arafat, to limit the powers of the new position.

Ahead of the vote, Mr. Arafat dropped his demand to retain a say over the appointment of cabinet ministers. From now on the appointments will be under the control of the prime minister.

The bill received 69 votes in the 88-member parliament. There was one abstention.

Mr. Arafat must now sign the legislation for it to become a law and then formally offer the job to his preferred candidate, Mahmoud Abbas, his deputy in the Palestinian Authority.

Mr. Abbas, who is also known by as Abu Mazen, is favored by the United States and Israel.

President Bush said last week that installing a prime minister with real powers is a prerequisite for making public an international plan that could lead to the establishment of a Palestinian state within the next three years.

Under the legislation passed by the Palestinian parliament, the prime minister will have control over the day-to-day running of the government.

Though Mr. Arafat will no longer have the right to appoint cabinet ministers, the Palestinian leader has retained authority over other key areas, including security and the final say in any peace negotiations. He also has the right to dismiss the prime minister.

But Mr. Arafat is running into strong opposition from the United States and Israel, both of which have called for him to be replaced.

Mr. Abbas, who has called for an end to Palestinian violence against Israel, is seen as a more credible alternative.